Performance Bonus may be included in the minimum wage

The Labor Court Düsseldorf (Arbeitsgericht Düsseldorf) decided by judgment of 20 April 2015 (docket no.: 5 Ca 1675/15) that a performance bonus awarded by the employer may be credited to the legal minimum wage. Employers will welcome the decision of the Labor Court Düsseldorf. The decision indicates that not only components of the salary which compensate the “regular work performance” of the employee form the minimum wage amount, but also all payments related to the work performed by the employee may be included in the minimum wage.

The German Minimum Wage Act (Gesetz zur Regelung eines allgemeinen Mindestlohns – Mindestlohngesetz (MiLoG)) entered into force on 1 January 2015 and generally guarantees a minimum wage of EUR 8,50 per hour. The decision of the Labor Court Düsseldorf is another step in clarifying the controversial question of whether special payments made by the employer may be included in the minimum wage.

In the Labor Court Düsseldorf’s decision, an employee was claiming payment of the minimum wage. Before the Minimum Wage Act became effective, the employee earned EUR 8,10 per hour. The company operated a bonus scheme which provided an optional bonus for special performance of a maximum of EUR 1,00 per hour. The plaintiff argued she was entitled to the minimum wage of EUR 8,50 per hour and that the performance bonus must be paid on top of it. The employer argued that the plaintiff’s salary was EUR 8,10 per hour as provided in her employment contract but as a performance bonus of EUR 0,40 per hour was paid in accordance with the corporate bonus scheme, her total remuneration would be EUR 8,50 per hour.

The employee based her argument on the widespread and controversial point of view that the minimum wage amount only covers the “regular work performance” of the employee; awards and bonuses granted for special work performance should be paid on top of it. The Labor Court Düsseldorf did not follow this point of view. It ruled that any payment of the employer related to the employees’ work performance may be credited to the minimum wage. The only condition for crediting additional payments is the relationship between the special payment and the work conducted by the employee. Only those payments which are not connected to the work performed may not be included in the minimum wage amount. Since a bonus for special performance is related to the work performed it may form part of the minimum wage amount.

The decision of the Amtsgericht Düsseldorf will be appreciated by the employers. Companies will probably justify the inclusion of special payments in the minimum wage on the basis of this decision. Nevertheless, an appeal is permissible. It remains to be seen whether the employee will file an appeal and if the appellate court, the Higher Labor Court Düsseldorf (Landesarbeitsgericht Düsseldorf) will confirm the Labor Court Düsseldorf’s point of view.

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